Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Bank Examinations > FDIC Enforcement Decisions and Orders




FDIC Enforcement Decisions and Orders

ED&O Home | Search Form | Text Search | ED&O Help


{{4-1-90 p.A-1485}}
   [5138] Docket No. FDIC 88-150e (8-1-89).

   FDIC dismissed proceedings against Respondent, a former bank director who had resigned his position the day before being served with a Notice of Removal. FDIC dismissed the proceedings because the United States Court of Appeals held in an unrelated case that Section 8(e) of the Federal Deposit Insurance Act does not authorize the removal of a director who resigns before being served with Notice of Removal proceedings.

   [.1] Practice and Procedure—Interlocutory Appeals—New Law
   Grant of Special Permission to Appeal is appropriate when the United States Court of Appeals establishes new law relevant to the proceeding.

   [.2] Prohibition, Removal, or Suspension—Defenses—Resignation Before Notice
   FDIC may not seek a removal or prohibition order against a former bank director who resigns his position before being served with a Notice of Removal or Prohibition.

In the Matter of
* * *Individually, and as president,
director, and a participant in the conduct
of the affairs of * * * BANK


(Insured State Nonmember Bank)
DECISION AND ORDER DISMISSING
PROCEEDING

   On November 17, 1988, the administrative law judge assigned to this case denied Respondent's motion to dismiss this proceeding. Respondent argued the Federal Deposit Insurance Corporation ("FDIC") lacked jurisdiction to issue an order to prohibit his future participation in the affairs of * * * Bank and other federally insured financial institutions because he resigned his position at * * * Bank on August 9, 1988, one day prior to the issuance of the notice that the FDIC intended to seek his removal.
   On March 30, 1989, Respondent filed for reconsideration by the administrative law judge, a Motion for Reconsideration of the administrative law judge's November 17, 1988 denial of Respondent's Motion to Dis- {{4-1-90 p.A-1486}}miss for Lack of Jurisdiction Over the Subject Matter. The administrative law judge referred Respondent's Motion for Reconsideration to the Board for a determination.
   The motion for reconsideration is based on the March 3, 1989, decision of the United State Court of Appeals for the District of Columbia Circuit in Stoddard v. Board of Governors of the Federal Reserve System, 868 F.2d 1308 (D.C. Cir. 1989). In Stoddard, the D.C. Circuit held that the statutory language the FDIC was relying upon in this enforcement proceeding, section 8(e) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e), does not authorize the issuance of a removal or prohibition order against a bank officer or director who resigns his position before he is served with the notice that the agency intends to seek his removal. The Compliance and Enforcement Section of the FDIC's Legal Division opposes dismissal.

   [.1] Pursuant to section 308.12(e) of the FDIC Rules and Regulations, 12 C.F.R. §308.12(e), the Board considers interlocutory appeals only upon grant of special permission. Interlocutory review is appropriate with regard to Mr. * * *'s motion because the Stoddard decision establishes new law limiting the Board's jurisdiction under section 8(e) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e).

   [.2] Although the Board and the Comptroller of the Currency, which operates under the same provision as to National bank officers and directors, had consistently held that the resignation of a bank officer or director prior to the issuance of a section 8(e) notice does not affect the agency's authority to issue an order of prohibition, the D.C. Circuit has ruled otherwise in Stoddard.
   To be consistent with the law of this circuit, the Board must dismiss this proceeding. The proceeding is dismissed without prejudice so that a new proceeding may be instituted to determine whether Mr. * * * should be prohibited from participation in the conduct of the affairs of federally insured financial institutions in the event the Federal Deposit Insurance Act is amended to authorize such orders against individuals who resign prior to the issuance of notices. Similarly, this decision and order does not bar an action under section 8(e)(2) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(2), in the event that Mr. * * * becomes an officer or director of another bank.
   THEREFORE, IT IS ORDERED, that Respondent's request for reconsideration is GRANTED;
   IT IS FURTHER ORDERED, that this proceeding is DISMISSED WITHOUT PREJUDICE.
   By direction of the Board of Directors.
   Dated at Washington, D.C., this 1st day of August, 1989.

In the Matter of
* * * Individually, and as president,
director, and a participant in conduct of
the affairs of * * * BANK * * *
(Insured State Nonmember Bank)
REFERRAL OF MOTION

   This is an action under 12 U.S.C. §1818(e)(1) to remove the Respondent as President and Director of * * * Bank, * * * (herein the Bank). The Notice initiating this matter was issued on August 10, 1988. Pursuant to the terms of a Settlement Agreement dated August 9, 1988, between the Bank and the Respondent, on that day the Respondent handwrote a resignation as "President Chief Executive, Trustee and employee of * * * Bank and as Vice President and Director of * * *, Inc."
   With his answer, the Respondent included a Motion to Dismiss for Lack of Jurisdiction contending that his resignation the day before issuance of the Notice deprived the FDIC of jurisdiction to proceed against him under §1818(e)(1).
   On November 17, 1988, I denied the Respondent's Motion. I concluded that a decision by the Board of Governors of the Federal Reserve System construing §1818(e)(1) in a matter initiated by the Comptroller of the Currency was authoritative and would probably be followed by the FDIC Board. In re Stanford C. Stoddard, Docket No. AA-EC-85-44 (Jan. 29, 1988).
   In brief, as I read Stoddard, the Board of Governors held that the word "remove" was not used by Congress in its literal linguistic sense. Rather, "remove" is a word of art, akin decertification of one engaged in a licensed profession. The trust of §1818(e) is to empower the banking agencies to rid the industry of individuals who have engaged in egregious activity. Congress was not particularly concerned with employment as such. Since the nature of a removal action {{4-1-90 p.A-1487}}involves more than whether one can continue in his job, that he may have resigned before commencement of the action should not divest the agency of jurisdiction. Further, to conclude that an individual can control the jurisdiction of the appropriate federal banking agency would necessarily impede enforcement actions and would lessen their deterrent effect.
   On March 3, 1989, the United States Court of Appeals of the District of Columbia Circuit reversed the Board of Governors. Stoddard v. Board of Governors of the Federal Reserve System, No. 88-1148. The Court held: "The construction the Board asks us to accept presents a linguistic (and metaphysical) impossibility. One cannot remove what isn't there." Slip op. at 5.
   Thereafter the Respondent filed with me a Motion for Reconsideration and counsel for the FDIC filed his opposition on grounds that the Circuit Court decision has not yet become final (the mandate will probably issue in early June), was incorrectly decided and there is a factual issue concerning whether the Respondent's resignation was legally effective on August 9, though counsel does not contest the resignation was in fact signed that day.
   Since the construction to be given §1818(e)(1) is uncertain, I conclude that a decision by the FDIC Board on this issue is essential to the proper conduct of this proceeding. Accordingly, pursuant to §308.12(d) of the applicable FDIC Rules and Regulations, I hereby refer the Respondent's Motion for Reconsideration to the FDIC Board.
   Dated: May 19, 1989

ED&O Home | Search Form | Text Search | ED&O Help

Last Updated 6/6/2003 legal@fdic.gov